News

AMS, Inc.

This is a guest post by Eric Gauf. Eric is the current representative of the Faculty of Law on AMS Council, and will be graduating in May. His past academic follies are best described as a background in Computer Engineering and a B.A. (Honours) in History from the University of Alberta. His current favorite fruit is fresh lychee nuts, and recent beers have tended towards pale ales. Comments, job offers, and any other valid expression of your Charter s. 2(b) rights should be sent to ubclawamsrep@gmail.com.

The AMS is a monstrous, confused beast. At least, that’s the ungenerous opinion that I’ve formed over the past three years, first as a proxy for the Law Rep, then as the Law Rep in my own right. UBC Insiders has been kind enough to offer to share their soapbox, and I’d like to make use of this space to offer my thoughts on the proposed restructuring of the AMS that’s coming before Council on Wednesday, February 8th. That said, the proposal is being brought by the VP Finance, Elin Tayyar, and any explanation or detail about the plan that I discuss here reflects only my understanding of the plan as presented at the committee level.

First, a bit of background: I didn’t do my undergrad at UBC, so my first introduction to the AMS was the UN complaint. In the aftermath of that chaos, I sat as a proxy for the law Rep, Dia, and then did so again for the next law rep, Kate. The second meeting I attended was round one of the cuts to the services budget, and at the time, the numbers seemed bizarre. That was the 2010/2011 budget. I took a closer look at the budget for 2011/2012, and my initial impression didn’t change. The AMS lives in a bizarre cycle, with each exec and council presiding over part of two different fiscal years, with no control over their income, and with the funding for substantial programs left at the mercy of annual business performance. There is no long-term plan, and at this stage, there can’t possibly be one.

How the AMS got to this point is a relatively familiar refrain. The AMS passed various fee referenda back in the 70s and early 80s, but failed to index them to inflation. As UBC grew, it has become increasingly difficult to hold general meetings that meet quorum (“have enough students in the room”), and as student participation in AMS elections has dropped, it’s been only slightly less difficult to pass a referendum. Until last year’s fee referendum, the AMS was making do with the fees it had established back in 1982.

How the AMS managed to “make do” and keep up with a growing student population on a fixed income was by relying on the profits from their businesses to fund programs for students. In principle, this is a good idea. In practice, there are a few problems with it.

One problem, structurally, is that the AMS did this too fast. The AMS lived year-to-year, relying on estimates based on last year’s income to plan the next year’s programs. This worked great while business profits grew, but whenever profits contracted, student leaders had to cut programs, regardless of how worthy (or worthless) they may have been. The graph of that process is a sawtoothed rollercoaster. With an annual change in leadership, there is no way to reliably plan ahead, and starkly limited incentives to save for the future.

The other problem is that by relying on our businesses to fund the AMS, we started to press up against the boundaries of the definition of a not-for-profit society. The Canada Revenue Agency has reviewed our files, and there’s a significant difference between how we’ve been doing our accounting, and how the CRA views things. The short version is that they expect the AMS to pay significantly more taxes, and if we don’t change things, they’ll be expecting it every year down the road as well.

The proposed restructuring is a substantial (but not complete) solution to these two problems. Before getting into how it solves these problems, it would be best to lay out what the new structure would be, and to do that we need to start with the current structure.

Currently, the AMS is constituted under the Society Act. The members are the students of UBC. The board of directors is AMS council, elected largely from the constituencies. There is also an elected five-member executive team. Under the executive is the General Manager, a full-time staff member who serves as a huge force for continuity in the AMS. Under the GM are the various administration groups (HR, Communications, etc), and a host of other roles, like the Archivist (who is indispensible to AMS Council), and various student services. The businesses are under the Director of Operations, who reports to the GM. There’s been a slight change recently, in that the AMS is in the process of hiring a Director of Student Services as a layer of co-ordination between the various student services and the GM. The AMS Council and the exec assume different levels of control over the businesses depending on who is serving in those roles. Some years, it’s a hands-off relationship, and in other years, AMS Council gets into the details of setting prices, but technically, as the board and executive of the society, they hold a huge amount of power.

The proposed structure would set up a new corporation, under the Business Corporations Act, which would be wholly owned by the AMS. Most of the administrative units (Human Resources, Finance, Operations and the subsidiary businesses) would move over to the new corporation. For the sake of brevity, I’ll refer to the new thing as “AMS Inc.” There’s a position labeled “GM” on both charts, and for the foreseeable future, that role in both organizations will be filled by the same person, in order to facilitate communications and coordination between the two entities. The exec admin support, Communications, and Student Services would stay with the AMS. The “New SUB” project appears on both sides of the chart, as elements of it are relevant to both organizations, but it’s a special purpose entity to begin with. In any case, student control over the project will be maintained.

AMS Inc would be governed by a separate board of directors, with twelve members, from four different groups. As proposed, the board would have three alumni, serving three year terms, four students-at-large, serving two-year terms, two of the AMS execs, and three members of AMS Council. The appointments of the multi-year directors would be staggered, and the intent behind the two-year student-at-large appointments is to strike a balance between student input, and the skill and knowledge of the directors. As a separate corporation, the board would control AMS Inc independent of AMS Council, although the AMS could make presentations to the board, and, as the owner (and with proper paperwork set up) the AMS could recall the directors (individually or collectively).

The proposed change involves a dramatic reduction in the direct control that the AMS can exert over its businesses, on paper. Arguably, the AMS already has little direct control, with Council following the proposals of the staff. If the staff are unhappy with a certain proposal, they only have to ride out each single-year term before things change. This isn’t a healthy relationship – I have a deep respect for the General Manager and the staff of the AMS, but the lack of oversight and the annual uncertainty means that the best we can manage is mediocre.

With the AMS Inc plan, the AMS can build in safeguards to ensure the Board complies with AMS values, and to recall the Board in case of significant conflict. It’s still a leap, but I’m confident that we can hammer out the details in a way that will make the leap a whole lot shorter. If we can’t, well, we don’t make the shift. That’s why we’re doing this in a few rounds – approve the idea Wednesday, then fill in the details to make it happen.

So, back to the “why” – the tax problem, and the sawtooth. The immediate reason for the restructuring is to avoid the tax bill. If AMS Inc absorbs the majority of the AMS’s current admin costs, the businesses, in their current state, will be essentially running at break-even. The AMS (not-for-profit society), with the admin costs removed from its budget, can run at break-even on only its student fee revenue. We can tweak that for the desired result in how we set up the contractual arrangements between the AMS and AMS Inc – basically the administrative staff will still do what they did before for both groups, but with an extra bit of accounting on top.

Looking longer term, the sawtooth is solved two ways. With an independent board and multi-year terms, the businesses gain significant stability and direction. The businesses can make the choices necessary for their own successful operations, with student input, but without having to pass through an impossible forty-person gauntlet that is council. By separating the budgets, we make it clear that the AMS lives off of student fees, avoiding the tax bill, and finishing the process of weaning us off of direct reliance on the business profits.

The last piece of the puzzle is buried deeper in Elin’s proposal: the profits from the businesses will be invested in the AMS endowment fund. This is the key to solving the sawtooth – putting the profits towards building a steady income stream for the AMS. It’s a slower process, but in the long term, it will allow the AMS to significantly increase the level of services that it provides to students. This isn’t a new idea – many student societies across Canada supplement their fees with endowment revenue (Waterloo, for one) – but it’s a very good one.

How to strike the balance between reinvesting in the businesses and contributing to the endowment is one of the details that remains to be worked out, as does how to enforce this requirement on the new AMS Inc. By having full control of the corporation as it is born, we can wire these things in from the start. Another detail that needs to be hammered out is how to have the AMS and AMS Inc share their toys (for example, Communications Director Demitri Douzenis) – there will need to be contractual arrangements, and some sort of liaison mechanism in place to make sure that things continue to work smoothly. This is part of the reason for having the same person in the GM role in both organizations. These are details. Details cost money. Elin will be standing up on Wednesday night to ask AMS Council to support this idea in principal, and start hammering out the details.

I think the plan is a very good idea, but any idea can be improved by critical review. In order to make this work, and to make this work for the students who come after us, we’ll need to thoroughly kick the tires, pick the locks, and peer into the nooks and crannies to figure out how someone might try and exploit it. Then, after we nail down all the details, we have to make sure that we’ve left the AMS Council and the AMS Inc board with enough flexibility to fix things when some clever person comes up with something we never thought of (probably very quickly). Making this change will shift the AMS from perpetual crisis mode to… let’s be frank, to near-perpetual crisis mode, but at least it will be able to better serve students while the councilors spend their Wednesday nights working on their public speaking skills.